ORIGINAL: The Rev
It could be that your peep is not in the right place. With your eyes closed draw your bow and make sure your touching all your anchor points. Open your eyes and you should be looking right out your peep. Your peep should not be twisted, it should be open and facing your sights. Also it could be the hole in your peep is just too small.. They make 1/4 inch peeps and that is plenty to see through.. I use a 1/8.
If you can get by a bow shop, you should go in and let them see how you are drawing your bow, that would be the best thing to do. I bet it's just a minor adjustment.
No you don't have to use a peep, however this is also another anchor point. it's best to have three anchor points to keep you shooting consistent.
Could not have beensaid better.....
I also think it's an adjustment problem, that is unless you have major issues with your eyesight. Then it might just be your eyes that are the problem.